Chinese Media Suggests Moody's May Have Profited From Cutting China's Outlook
Yicai Global
/SOURCE : Yicai
Chinese Media Suggests Moody's May Have Profited From Cutting China's Outlook

(Yicai Global) May 25 -- A number of Chinese media outlets are joining the government and public officials in criticizing international ratings agency Moody's Investors Service for lowering China's credit outlook.

Baidu Baijia, a media agency set up by Baidu Inc. [NASDAQ:BIDU] that pools investigative reports, yesterday published a report suggesting that Moody's has made money from shorting China.

Moody's cut China's credit-rating outlook to negative from stable on March 1. The New York-based company cited the country's rising debts and questioned its ability carry out reforms. It affirmed China's long-term credit rating of Aa3, the fourth-highest investment grade.

The Baidu Baijia report said Moody's is actually a listed company backed by billionaire Mr. Warren Buffett. It has a market capitalization of almost USD18.2 billion, about a quarter of that of China's biggest retail bank, China Merchants Bank Ltd. [SHA:600036]. The report also pointed out that in 2008, Moody's shares plunged sharply after the outbreak of the subprime debt crisis as the company had given erroneous ratings on junk bonds.

Moody's recovered quickly after 2012, however. According to the report, Moody's has recouped its strength for two main reasons: first, revenue from emerging markets increased substantially, with the Asia-Pacific region, including China, accounting for 10 percent of its total revenue; second, providing 'cautious' ratings on emerging countries such as China and Russia for the US and European markets, which make up about 70 percent of Moody's total revenue, is another way of helping stabilize mature clients.

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